Saturday, June 7, 2008

This came in as a comment, but it is far too good to be buried in comments so I have hijacked it into a guest blog:

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I have been appalled as I have watched what has been happening to so-called "edge case" sellers on eBay UK over recent times, as good sellers with low gross numbers are being purged due to circumstances they have no control over (such as neutral feedback praising the seller but criticising slow postal delivery). For other readers, Tamebay is a good blog to start exploring this nasty phenomenon. I am disappointed to say that the same ruthless treatment of small sellers and low volume livelihoods has started on the Australian site late this week.

Meanwhile this week I read an article published in Business Week titled "Auctions on eBay: A Dying Breed". In this John Donahoe is quoted saying

"As [Web] search has developed, you can get a great deal in a fixed-price format,"

Donahoe said in an Apr. 16 interview after his first earnings call as eBay's top executive.

"We are going to let our buyers choose."

I can't help but getting the niggling feeling that the key to Donahoe's "emerging market segment" lies buried in the context of that quote (and I really hope that I am wrong).

Surely a company that attracted sellers by using the dynamic pricing model that competitive auctions creates, and, importantly does not invest anything in merchandise for their site, is not trying to set themselves up so that they are offering the cheapest mass volume merchandise on the internet. That may explain the shift from treating the seller (who actually pays eBay's fees) as being the customer, to now treating the buyer as their customer. In this environment, the customer is indeed never wrong - they are protected from criticism while being *encouraged* to criticize the seller they have bought merchandise from.

eBay is trying to market to sellers that free shipping is the on-line market expectation, although I have encountered nobody that does not work at eBay who believes this (some buyers may wish it was, but it is not their expectation). Thus eBay encourages cheaper listings, free and restricted shipping charges, and unrealistic customer expectations that are going to knock any seller who does not bend to their will off the site. And, herein lies the marketplace "innovation" that Donahoe is trying to achieve. Seriously discounting merchandise without actually owning or being liable for any of the stock that you sell.

The flaw in this is that it is unsustainable. In my opinion, eBay does indeed have a monopoly in parts of the online market. The sheer size means that as sellers fold and leave, others replace them instantly (in theory at least), and therefore eBay will never run out of the stock that it does not pay for.

I can't help but feeling this is the innovation that Donahoe is aiming at, controlling the market in such a way that you do not have to carry stock, but those that do are forced to offer ruthless discounts to "survive". The eBay model is NOT retail, and thus the only sellers that can survive in this environment are those who are buying liquidation and close out stock for pennies in the dollar and can viably sell below market rates. Other sellers can not survive selling in competition on the same site. This really is an unsustainable direction that eBay is being taken in - but eBay won't go broke, just countless faceless traders that are of so little importance that they are no longer even considered to be eBay's "customers".

It stinks, and it is destroying everything good about the marketplace in the process. And, all the way, while eBay pounds the message that sellers need to lower prices and shipping costs, eBay steadily increases the fees that they are charging successful sellers. Bah!

4 comments:

Kevin is sooooo right! The changes Donahoe is making may be "disruptive innovation" but he sure hasn't looked around at his online competition. He'll never surpass Amazon by trying to beat sellers into giving their stock away and with free listing no less. Sellers will continue to leave....and the sellers who take their place will be fewer and fewer. Perhaps Donahoe doesn't care about the future? Just grab whatever he can before it all caves? I don't really know - I just know that at this rate, ebay is doomed! They had something unique and now they want to fit into a retailer mold for cheap stuff and free shipping costs. They're looking for a faster turnover to grab that money even faster than a 7 day auction. Donahoe underestimates ebay's drawing power - nobody is going to work for him for nothing simply because its ebay! How stupidly immature. You would think for the millions of dollars Ebay can afford to pay a CEO they would have chosen one with some brainpower and business management skills.

I feel so bad for the sellers out there - the ones who believe they have to adjust their business model in order to survive - there IS no survival here - only how long a seller will last before he leaves in disgust or gets pushed out. Sellers must start diversifying - try other sites - build your own site and make sure you inform ALL your buyers where they can find you and WHY! Speak out or be doomed too.